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Vol. 12, No. 3 Week of January 21, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

KUPARUK ANNIVERSARY: Mid-‘90s see focus on cost cutting

Large-scale enhanced oil recovery approved for Kuparuk; alignment agreement will make satellite developments easier

Kristen Nelson

Petroleum News

The margins at Kuparuk are thin, an article in The Crude Gazette, the Kuparuk newsletter, explained in 1994.

“Anything and everything can impact our margins, including: OPEC, the state Legislature, production, operating costs and capital spending,” said Dan Lawrence.

At a West Texas Intermediate price of $16 a barrel, the budget estimate for 1994, the margin on Kuparuk crude is 36 cents a barrel, he said. Unfortunately, oil prices had been $1 to $2 a barrel below budget so far in the year, so, he told Kuparuk readers, “you can see it’s not a favorable situation in which we find ourselves.”

The price of crude oil impacted the entire company: a staff reduction of 750 was announced in June 1994.

ARCO Alaska President Ken Thompson said while the reductions were painful for all employees, they were “necessary to enable ARCO to be a long-term competitor in the global market.”

The company had 2,800 employees in 1990; that number was down to 2,350 in 1994; and the goal was 1,600.

Thompson said reductions would affect every area of the company, both Anchorage and the North Slope.

He said ARCO Alaska would continue to explore for new economic sources of oil in areas close to existing fields and available transportation and would seek new ways to flatten decline of production from existing fields, and even stem that decline.

Recycling at Kuparuk

One person’s garbage — scrap wood — is another person’s fuel, said a 1994 article in The Crude Gazette.

Lisa Pekich reported that Kuparuk had started a scrap wood recycling project, collecting it in conexes and hauling it back for donation to the Palmer Correction Facility where it was used as fuel in wood-burning boilers.

Pekich said the idea came from a summer intern working for the Drilling Department.

Benefits to Kuparuk?

In the first month of implementation, dumpster pickups from the warehouse were cut in half — from once in two weeks to once a month. As of October, she said, 10 full conexes had been shipped to Palmer, saving some $15,000 in disposal costs.

Also in 1994, Nancy Remmler, writing for the Kuparuk Athletic Club committee, said KAC is offering the Kuparuk Winter Challenge, a triathlon, with participants rowing 2,500 meters, biking for 8 kilometers and finishing with a 2 mile run on the treadmill, or the biathlon, with participants biking for 4 kilometers followed by a 1 mile walk.

Participants will be racing against the clock for a personal best, Remmler said.

Drilling resumes

Drilling has resumed at Kuparuk, James Thantham and Mike Zanghi reported in the April 1995 issue of The Crude Gazette.

Parker 245 immediately broke field records, they said.

After being stacked for five months, the rig drilled more 12-1/4 inch hole in a single 24-hour period than ever before, 4,627 feet, the top 10 12-1/4 inch footage records for the field.

The second well drilled, 1R-33, set field records for measured depth and departure, they said. The well had a total depth of 15,530 feet and the departure from the surface location is 12,775 feet, with a total vertical depth of 6,946 feet, a measured depth to total vertical depth ratio of 2.2.

They said the bottom hole of the well is three miles from 1R pad, and between two wells from 3H pad.

The third well drilled, 1R-34, holds the field’s second longest MD at 13,570 feet with a departure of 10,467 feet.

Zanghi also reported that the Kuparuk drill site development group established in 1994 to provide economic evaluation, design and construction of wells and facilities for Kuparuk development projects combines functions of petroleum engineering, facilities, materials and drilling.

He said the group intends to work closely with Kuparuk production to meet Kuparuk field objectives.

1995: LSEOR approved by state; 1996 startup

The Alaska Spark reported in October 1995 that the State of Alaska has approved the large scale enhanced oil recovery project at Kuparuk.

LSEOR is expected to extend the life of the Kuparuk field and increase its oil recovery by more than 200 million barrels.

The project will use approximately 100 million barrels of Prudhoe Bay natural gas liquids, which will be transported to Kuparuk through the Oliktok pipeline and reinjected at Kuparuk.

Approximately 35 percent of the NGLs will eventually be produced as part of the Kuparuk crude stream. Changes in state tax regulations as they apply to NGLs made the project more attractive to ARCO and the other co-owner companies.

Some $135 million will be spent on 66 injection and production wells on the field and the companies will also invest $38 million in two new facility modules.

LSEOR started as a small-scale pilot project in 1989 on two Kuparuk drill sites and favorable results inspired planning for expansion.

The project received funding approvals in March 1995.

ARCO Alaska began testing miscible gas EOR on two of Kuparuk’s 42 drill sites in 1989, and field owners approved LSEOR and expansion of the process to 20 drill sites in the southern half of the field.

Tuan Ma, Kuparuk development EOR coordinator, said in the Alaska Spark in February 1997 that Kuparuk’s large scale enhanced oil recovery, LSEOR, “charged out of the gate on schedule Sept. 1.”

The Kuparuk EOR process mixes the field’s own lean gas with indigenous natural gas liquids and imported Prudhoe Bay NGLs to make a “souped-up gas,” miscible injectant or MI, which is injected alternately with water, acting as a solvent and displacing most of the oil left behind by water injection toward producing wells.

LSEOR is expected to add another 200 million barrels to Kuparuk reserves.

The MI rate quadrupled from some 50 million cubic feet per day to 216 million cubic feet per day in the fourth quarter of 1996. The LSEOR helps blow down the CPF-1 gas storage area by using more lean gas to make MI, Ma said.

The project is expected to produce an oil wedge of 12,000 barrels per day in 1997, a wedge which will grow to some 40,000 bpd by the turn of the century.

1997: drilling cost reduction

In 1997 the Kuparuk drill site development team plans to reach its long-term goal of reducing drilling development costs by 30 percent, the Alaska Spark said in late 1996.

Since this quest started in 1994, the organization has taken a second look at how wells are drilled, applied some existing technologies and developed some of their own technology along the way.

Kuparuk wells have been redesigned to optimize performance, maintain production rates and meet the team’s low-cost, long-term goals.

“The objective was cost reduction through redesign of the wells and eliminating those things that are not absolutely necessary to develop the reserves,” said Mike Zanghi, Kuparuk drill site development supervisor.

The size of the wells was reduced and in some cases one string of pipe was eliminated and they made completions simpler.

The cost of drilling a well was reduced from an average of $1.6 million in 1993 to an expected $1.1 million in 1997.

“We’ve gotten the sidetrack cost down to where for close to the same cost as a workover we can get a new well bore and direct the well to a spot in the reservoir where we really want it,” Zanghi said.

The drilling schedule will also change in 1997, with the first half of the year spent on Kuparuk wells and the rest of the year spent on phase 1 of West Sak and the Tabasco reservoirs.

By the end of 1996, Kuparuk will try its first multilateral well using a new approach; three multilaterals have been attempted at Prudhoe Bay, and the Kuparuk team worked closely with Shared Services Drilling to learn from that work.

The Kuparuk team is also focusing on potential development of an ultra slimhole for injector wells.

Satellite development accelerated

As many as 50 satellite oil fields have been mapped on the North Slope, with combined accumulations of more than 1.2 billion barrels — excluding West Sak, the Alaska Spark said in December 1996.

Kuparuk is anticipating a facility sharing agreement before the end of 1996 to allow development of reserves that wouldn’t otherwise be developed because the fields are too small to justify their own facilities.

In 1996 six owner companies (ARCO, Chevron, Phillips, Mobil, BP and Exxon) from the Prudhoe Bay unit joined forces to study a group of satellites: Schrader Bluff, S Pad Kuparuk, West End/NEW Kuparuk, Sierra Nevada, Sambuca and Beechey State.

Kuparuk went a step further. In November 1996 ARCO and BP moved to common equity on all their interests in the Kuparuk area and announced an agreement to establish common equity in 63 leases bordering the Kuparuk unit. The final agreement will include additional acreage within the Greater Kuparuk Area.

“Kuparuk has the advantage that 95 percent of the field is owned by two companies,” said Kuparuk Development Manager Scott Kerr. “So we took the position that if we align our interest across the field; cross-assign all of our acreage; agree in advance to facility access terms and some ability to go non-consent; then we won’t have any more arguments over equity or agreements. We’ll set everything up in advance and that’s what we’re doing.”

A number of satellites have been identified within the Kuparuk area and the equalized equity agreement means that either company can move forward to explore and develop the satellites. Though the majority of the area is owned by the two companies, other companies have a smaller interest in the field and have been invited to participate in the facility sharing agreement.

The Kuparuk agreement is in its final stages and includes: cross-assigned acreage; a new operating agreement and special provisions for dealing with West Sak and other heavy oil reservoirs.

Three prospects are scheduled for exploration drilling in the winter of 1996-97 and additional 3-D seismic is planned for the western area of Kuparuk and the adjacent acreage.

“We’ve often said that about half of the known oil resource in Kuparuk is yet to be developed,” Kerr said. “An estimated 5 billion barrels of oil is in place and has yet to be exploited. That includes West Sak, but it also includes other resources that we believe to be there.”

The risk factor of bringing satellite fields online exists when the maximum capacity for handling gas and water at each facility is reached. While the facilities have room to handle more oil, several have reached the maximum capacity for handling gas, some have also reached capacity for handling produced water.

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Kuparuk EOR ‘my proud baby’

*Tuan Ma, now a reservoir engineer with ConocoPhillips Asia Pacific organization, was at Kuparuk from 1985 to 2002.

“Kuparuk EOR was my proud baby during those years. I was privileged to justify the Kuparuk small scale EOR project and coordinate the implementation of the large scale EOR expansion project,” Ma said in a 2007 e-mail.

“It was fun participating in the company ad about Kuparuk’s ‘souped up natural gas’ with Janet Weiss and Scott Kerr,” Ma said. “And who is not impressed with the caliber of people and assets that we have on the North Slope.”

*Jim Short was involved with Kuparuk permitting and environmental issues during the 1980s and in 2006 returned to ConocoPhillips at Alpine.

“One big change is the large increase in volume and complexity of regulations, along with associated procedures, monitoring and reporting,” he said in an e-mail. “Two of the largest increases have come in air quality control permitting and spill response readiness.

“The Kuparuk work force has always done an exceptional job at managing HSE responsibilities and meeting new regulatory challenges,” Short said.

The project or team accomplishments Short is most proud of are sealift and startup of CPF-3 and the Kuparuk seawater treatment plant and “reduction in the footprint size and elimination of reserve pits for new drill sites.”

As for field history, Short said many people now do not know that “the ‘J’ and ‘K’ shifts at Kuparuk were named after the first camp managers, ‘Joe’ Morgan and ‘Kirk’ Barker.”